International Political Economy

1. Definition:
 A study of interrelationship between economics and politics, and between state
and markets. It also examines how politics is used to achieve economic goals and
vice – versa
 International political economy is a sub-discipline of international relations that
analyzes connections between the world’s international political and economic
systems.

2. Introduction
 Became part of IR discourse in 1970s and 1980s
 IPE is not a theory of IR, rather it is an approach to international analysis that
focuses on the influence of economics on politics
 Early work on IPE in IR was done by Susan Strange 1970s when multiple
economic crises hit the world for example food crisis, oil crisis, and sovereign
debt crisis of several Latin American countries. All that happened between 1972
and 1979, in this context the role of creditor international institutions increased.
 These events were pre-ceded by the collapse of Bretton Woods system in 1971
when president Nixon abruptly abandoned the link between dollar and gold.
 The Bretton Woods system evolved after the second world war, to manage
following three economic issues.
1. The regulation of trade.
2. The currency exchange.
3. The economic development.
 These economic dislocations and political instability that followed the 1970s
crisis highlighted the impact of the global economy on international relations.
Ever since, IPE has developed into an important sub-discipline of IR with its own
theories, research priorities, and policy recommendations.

3. Origin of International Economy to 1945:

 Centuries old phenomenon of exchange of goods - barter trade.
 Rise in growth of European sea power, in the 16th and 17th centuries - Columbus
and Vasco da Gama.
 Mercantilism
o “An economic philosophy advocating governmental regulation of economic
life to increase state power and security”
 o “Modern version of Mercantilism philosophy is Statism”
 Imperialism.
 Adam Smith, the wealth of nations - 18th century Scottish Economist “it defines
wealth as the labor and production of a state, rather than its supply of gold and
silver - an important in favor of free trade or Laissez Fair economics.
 First world war led to great depression of 1920s late which brought about the
resurgence of protectionism in the form of “beggar thy neighbor”.
 The Bretton Woods system 1944, IMF Gatt and World Bank.

4. Economic Liberalism and Its Key Concepts

 The ideological belief that greatest number of economic decisions are made by
individuals and not by collective institutions or organizations
 Comparative advantage theory ( Import what you cannot produce efficiently)
 Liberalization of National Currencies
 Protectionism
 Vanguard of Economic Liberalism MNCs
 Instruments of Economic Liberalism Bretton Woods system

5. The Washington Consensus

 A series of economic policies that reflected the USA’s new neo-liberal economic
interests

6. Post-Cold war International Economy

 The severe terms imposed on debtors by the Washington consensus was relaxed
for the following reasons.
1. Transition of communist block to world capitalist system.
2. Short term profits preferred over long term - FDIs, MNCs and WTO
3. Western and central Europe’s integration, EU 1993, euro-currency 2002, BRICS
(competing USA and European Union)
4. The global financial crises 2007-2009.

7. Beijing Consensus
 Refers to the political and economic policies of China that began to be instituted
by China after Mao’s death 1976.
 Opposed to the universality of Washington Model
 Especially for developing counties as an alternative to Washington Model.
8. Realist View of International Political Economy
 Generally rooted in economic nationalism or mercantilism
 Markets are not natural, but exist within a social context, largely shaped by the
exercise of state power.
 States compete with each other for power and wealth in a zero sum game.
 The global economy has been fashioned by the interests of the most powerful
states.

9. Liberal View of IPE

 Harmony of interests among actors - reconciling national interests with economic
gains through Laissez Fair Economic practice

10.Marxist View of IPE

 A system of class exploitation known as capitalism
 Neo-Marxism views the interests of the capital class identified with those of
international corporations.
 Global economic regimes work on the principle of dualism.

11. Conclusion:
 From Columbus to Bretton Woods to the Washington Consensus, IPE has a lot to
tell us about the way the world works.
 Its main contribution to IR is found in its nuanced understanding of the
connection between international politics and the global economy.
 Better Multilateralism by Saqib Shirani
 Article by Munir Akram - Trade for development
 Aqdas Afzal - A new order
 All articles are from Dawn newspaper
 World Times book of IR